Local employment initiatives
An evaluation of support agencies
Luxembourg: Office for Official Publications of the European Communities. 1985
Catalogue number: CB-44-85-872-EN-C
Articles and texts appearing in this document may be reproduced freely in whole or in part providing their source is mentioned.
PROGRAMME OF RESEARCH AND ACTIONS ON THE DEVELOPMENT OF THE LABOUR MARKET
LOCAL EMPLOYMENT INITIATIVES AN EVALUATION OF SUPPORT AGENCIES
Centre for Research on European Women - CREW
The study examines the setting up, functioning and role of support organisations in the EEC. There is already clear evidence that where effective agencies exist, local job creation has increased.
The research was carried out through q u e s t i o n n a i r e s , on-the-spot visits and telephone interviews. The analysis presented is based on the practical experience of the agencies and the enterprises helped.
The study is divided into two parts. The first part, sub-divided into seven s e c t i o n s , contains the case studies of the seven areas examined. Each case study presents the views of the agencies interviewed, examines other support structures and, where possible, lists the views of some of the enterprises helped by each of the agencies, The case studies look at how these agencies were first set up, how they are funded, their internal working
a r r a n g e m e n t s , the type of counselling they give and their relationship with other groups in the area.
Part Two of the study contains a general analysis and concluding remarks.
PART I The case studies
Section 1 London 8 General introduction 8
Greater London Council - GLC 10 Greater London Enterprise Board - GLEB 13
Cooperative advice services 18 Industrial Common Ownership Movement - ICOM 21
The National Cooperative Development Agency 22 A different initiative from local authorities
-Camden Council 23 Small firm's advisory service 25
Support from private industry 26
Finance 27 Conclusion 28 Section 1.1 Islington Cooperative Development Agency 30
Background 30 The area of Islington 31
Internal structure and working of the CDA 32
Promotion and Counselling work 34
Monitoring 39 Premises 41 Bookkeeping and wages 42
Marketing 43 Finance 44 Wider deveiopment work 45
Future strategy 46 Some facts and figures 47
Comments from groups helped 49 Section 1.2 Lambeth Cooperative Development Agency 54
The area 54 Background 55 Structure and internal working of the agency 55
Counselling and promotion 57
Monitoring 61 Premises 63 Finance 64 Wi der devei opment work 65
Future strategy 67 Some facts and figures 69
Response from the cooperatives 70 Annex Extracts from Lambeth CDA's workers' cooperative
The internal working of the agency 104
Product development 106
Finance 107 Problems 108 Section 2 Initiatives from Industry - British Steel
Corporation (BSC) Industry 110 BSC Industry - Small enterprise workshops 113
Wider promotional and development work 118
Other initiatives 120 Section 2.1 The Derwentside Industrial Development Agency and
BSC Industry Consett workshops 123
The agency 123 The workshops 130 Section 2.2 Making business out of unemployment - Job Creation
Conclusions 138 Section 3 Belgium 140
Background to the Belgian movement 140 Characteristics of alternative enterprises in
Wallonia 141 The problem of funds 142
The legislative and administrative framework 144
The Charleroi region 145 Section 3.1 FUNOC - Association pour le Développement à
Charleroi d'Action Collectives de Formation
pour l'Université Ouverte 147 Setting up the agency 148 Structure of the organisation 149
Working methods 151
Projects 152 Conclusions 155 Section 3.2 Solidarité des Alternatives Wallonnes - SAW 157
Organisation of SAW 157 Internal organisation of the work 159
Counselling 160 Some facts and figures 167
What alternative - Cooperative or Asbl 167
Other aspects of SAW 's work 170
Introduction 175 Background 175 Structure of Nouvelles Coopératives "Federation" . 177
Organisation of the Nouvelles Coopératives
network 178 The support centres 180
Counselling 181 Wider development work 1JJ1
Facts and figures 193
Conclusion 194 Section 4 Italy 195 Section 4.1 LEGA - Emilia Romagna 201
Federcoop 204 Facts and figures 210
Views of the Cooperatives 213 Annex Yearly figures for the cooperative movement in
Emilia Romagna 215
Section 4.2 Campania 219 The cooperative associations in Campania 222
Confederation Campania 222
Lega 227 Section 4.3 CRESM 231
Background 232 Setting up the office 236
Internal working of the agency 237
Lioni 238 Promotion and counselling 239
Comer 243 Future strategy 247
Facts and figures 251 The cooperatives 252 Annex List of cooperatives in the Cratere area 261
Section 5 France 272 Boutiques de Gestion 272
The comité de liaison des Boutiques de gestion
(CLBG) 277 ESPACE-Rêgion - Etudes et services pour la
promo-tion des activités créatrices d'emplois 285
The economic environment 294 The role of cooperatives 295 Support and advice for local initiatives 298
Section 6.1 Stew - The foundation for experimental workshops,
Amsterdam 300 Historical background 300
Internal organisation 302
Counselling 304 The women 's team 305 The mixed team 307 Monitoring and guidance 308
Problems 310 Contacts with other groups 312
Future plans 314 Response of the groups aided 315
Some facts and figures 317 PART II Conclusions and Recommendations 320
Setting up and structure 321 General support and assistance for local
employ-ment initiatives 323 Promotional and wider development work 337
Training 338 Finance 339 Monitoring 342 Comments and Recommendations 343
The study describes and analyses a number of support or-ganisations in seven regions of EEC member countries. Within the regions, we interviewed support organisations,
looked at other support structures and where possible, interviewed businesses helped by each of the agencies.
By looking at agencies in a regional context it was felt that we could get a better idea of the problems met by the agencies and the type of environment they operate in.
The research was carried out through questionnaires, on-the-spot visits and telephone interviews. Using the same questionnaire for all the interviews, so that a comparison could be made, we examined how these agencies were first set up, how they are funded, their internal working arr-angements, i.e., how decisions are taken, how project allocation is decided, as well as the type of counselling they give and their relationship with other groups in the area.
Businesses which have dealt with the agency were asked to assess the help they had received and to comment on how it compared to other advice they had received from other organisations. We also asked them to indicate which types of advice, i.e., technical, managerial, was most necessary
The analysis presented is based on the practical experi-ence of the agencies and the enterprises helped by them.
1. Independent support agencies such as the Cooperative Development Agencies (London, U K ) , STEW (Amsterdam, the Netherlands), CRESM (Campania, Italy), Boutiques de Ges-tion (France), Nouvelles coopératives (Wallonia, Belgium).
2. Agencies directly run by local or state authorities such as the Wandsworth Development Agency (London, U K ) .
3. Services given by the cooperative organisations them-selves such as the Lega (Emilia Romagna, Italy).
4. Initiatives backed by industry such as the British Steel Corporation (BSC) Industry (North East, UK) and Job Creation Limited (operations in the UK and Amsterdam, the Netherlands) .
5. Significant university and trade union involvement such as Funoc (Charleroi, Belgium), Solidarité des Alter-natives Wallonnes (Wallonia, Belgium).
Special emphasis has been given to programmes run by these agencies aimed at target groups especially women, young people and ethnic minorities.
The regions chosen are the following:
1. London : In recent years the area has seen the collapse of its manufacturing base, an exodus of people and indus-tries and declining inner city areas. The most significant aspect of local job creation has been the growth in cooper· atives set up by the unemployed. These cooperatives often seek the help of Cooperative Development Agencies (CDA), which have played an important part in local employment
city such as the large immigrant communities and women. It has put its full weight behind local job creation es-pecially through cooperatives and through implementing an equal opportunities policy. The GLC has used its resour-ces to provide finance and to help set up support struc-tures, especially in boroughs where the local councils had little interest in backing such initiatives. We ana-lyse in the case study two of the longer-established CDAs which operate in two inner city boroughs badly hit by the economic crisis. The two CDAs are typical examples of the work done by such agencies and the problems facing them. Also selected was the Wandsworth Enterprise Development Agency (WEDA), set up on the initiative of the local c o u n c i l , to illust-rate the advantages and disadvantages of a different app-roach.
2. Initiatives from industry - BSC Industry
orts of individuals and groups to set up an alternative employment movement rather than coordinated initiatives by local authorities or industry. The study concentrates on three initiatives - one, Funoc, a training agency
which helps build up employment projects aimed especially at the unemployed, and two groups trying to promote alter-native employment projects especially cooperatives and linking them up in a self-supporting network.
4. Italy: Local initiatives of the type being studied al-most invariably choose to set up as cooperatives and so the study has concentrated on the cooperative movement. The study focuses on the Campania region in the Mezzo-giorno where, as a result of the 1981 earthquake, an inde-pendent agency was set up outside the cooperative associa-tions, to try and ensure that aid given to the area after the disaster went to permanent development and local job opportunities. The Mezzogiorno is much poorer than the industrialized north of Italy and is one of the EEC's least developed regions. The agency's relations with the coo-perative movement of the region and the policies of the cooperative associations are examined. The problems of the south and its relationship with the north of Italy are also reflected in the cooperative movement. The case study looks at the organisation and policies of one of the major cooperative associations in one of its northern strongholds, Emilia Romagna, which has probably one of the densest and strongest cooperative sectors in the EEC.
ser-vices it offers to women-only businesses. The different approaches of those working in the agency's women's team and the so-called mixed team are examined.
6. France: With their origins in the alternative movement of the 1970s, "Boutiques de gestion" were set up to pro-mote collective employment initiatives. The study looks at how the Boutiques de gestion are organised nationally and how their policy has developed since the original impetus. It seems from examples studied that Boutiques de gestion are finding it much easier to promote small firms owned by one person whereas development of larger collective groups and cooperatives seems to be more the role of the national cooperative association, SCOP. One of the agencies in the north of France is examined in more detail as is the role of SCOP's regional office in that area.
The existence of support organisations has undoubtedly helped in creating new jobs although the snowball effect of initiatives started by these agencies is not easy to define.
All agencies stressed that their job is to set up viable enterprises. But creating jobs is a slow process and some of the agencies are not equipped to judge what is a viable scheme and what is not. On the other hand, others may
have the experts who can offer good professional advice but are much weaker on the development work side, also essential in helping people gain the confidence to run their own businesses.
The need to develop new products and markets was also seen as essential to help groups expand and diversify be-yond the products and services they are familiar with.
The people or organisation involved in setting up the agency and how it was set up affects the way it operates. Voluntary groups, for example, reflect much more the co-llective self-management model with less hierarchical in-ternal work structures. An important issue is the balance between social aims and benefits for the community on the one hand and the need to ensure the economic viability of the initiatives promoted on the other. Public authorities and trade unions may be overly keen to push for the bigg-est possible number of jobs in return for their support for an agency. Sei f-f inanced bodies, like the big cooper-ative associations, scrutinise the economic viability of projects very carefully - with the drawback that they can be extremely hesitant to take a risk.
There are some 600 to 650 cooperatives in Britain, more than a quarter of which are in the greater London area. Now registrations nationally average five per w e e k ,
al-though not all start trading immediately. Some 5,500 peo-ple are employed in cooperatives, approximately 0.1% of employment in small firms. If growth continues at the same pace it is estimated that some 7,500 jobs will be created by 1985, passing the 25,000 mark by 1990 ( 1 ) .
Cooperatives have been increasing by 125 net a year. Some 29% of cooperatives are in greater London; 11% in the south west and north west; 10% in the North and 9% in the home counties.
Distribution by trading sector varies in each of the re-gions. Services predominate in London (42% of all service c o o p e r a t i v e s ) , while manufacturing and retailing tives are underrepresented. Of all the building coopera-tives in the country, 38% are in London, while no other region has more than 13%. Some 18% of all manufacturing cooperatives are in London; 14% of all transport ones and 16% of all retail cooperatives.
- some 25% of all cooperatives in the country compared with 16% for small firms and 11% of all businesses.
Most cooperatives are young (62% are less than four years old) and small (50% have five or fewer workers with an annual turnover of fe60,000 or l e s s ) .
Aggregate turnover of cooperatives is more than 1160 mill-ion, making the annual average turnover of each cooperative about fe165,000. This figure hides, however, the real size of the majority of cooperatives. The median (weighted) turnover is only about £60,000. Some 75% of the total turn-over is accounted for by 23% of cooperatives, 50% by the largest 8% of cooperatives. If the two cooperatives with the largest turnovers are added to these, the average turn-over jumps to £250,000 and the largest 8% cooperatives account for 70% of the total turnover.
Although most of the cooperatives are still quite new, the evidence indicates that their survival rate is similar to that of other new businesses. Some 30% of all coopera-tives that go out of business are four years old or less, and 8-10% of all cooperatives at any one time go out of business in the subsequent 12 months. However, it is clear that the cooperative sector is growing in absolute terms at a time when the trend is towards a slow decline in the number of businesses.
Some 90% of cooperatives believed that they could signi-ficantly increase their turnover from existing premises and fixed capital equipment. According to the survey, manufacturing cooperatives estimated a possible increase of 178%, services 5 4 % , transport and wholesale 4 1 % . But many said capital was a major problem,particularly the shortage of working capital.
It is to this underutilization of capacity in existing cooperatives and the encouragement of new ones that the Greater London Council, ( G L C ) , has turned its attention since the Labour Party took control in spring, 1981.
Greater London Council
London in the 1970s underwent industrial collapse and widespread loss of jobs in many service sectors (in the
last decade it has lost some half a million j o b s ) . This period saw the movement of companies out of London, wide-spread rationalisation and closures of London-based firms Many local initiatives were started and as part of this m o v e , aimed at creating jobs in the area and breathing new life into the economy, came the birth of the coopera-tive development agencies.
In May 1981, the Labour Party won the local elections to the GLC and promised public sector-led intervention poli-cies to develop the economy which had lost a third of its industrial jobs in a decade. The Labour Party said that measures designed simply to support private investment had proved inadequate.
not only because it has the greatest concentration of co-operatives in the UK but also because of the role taken by the GLC to build a support network around these ini-tiatives.
In 1983, the Greater London Enterprise Board (GLEB) was set up by the GLC with £32 million to invest in job cre-ation. GLEB was to be the main tool of the GLC's indus-trial policy. A high proportion of enterprises assisted were worker cooperatives and businesses run by ethnic m i -norities. In general, however, GLEB supports middle to large firms rather than small businesses, "since this is where the major job losses have occured." All firms re-ceiving aid from GLEB are expected to agree to an enter-prise plan which gives trade unions a greater say in the running of the enterprise.
In addition to GLEB, the Greater London Training Board was set up with £4 million to spend on training schemes
in London, special emphasis being given to extending the capital's skills base and also concentrating on w o m e n , ethnic minorities and other disadvantaged groups. Some £8 million is being spent in the industrial building and
refurbishing programme and the GLC has started to m o n i -tor companies trading with it (some £100 million annually is spent in purchases and contracts) to ensure that they observe "proper practices" in relation to equal opportu-nities, training and industrial relations. Money has also been put into setting up trade union resource centres and unemployment centres offering a wide range of advice.
conjunction with the local councils. CDAs can apply to GLEB for up to £20,000 to start their own revolving fund, giving grants and loans to cooperatives.
In the first year of its overall industrial programme, GLEB invested £18 million in 136 projects, saving 900 jobs and creating some 900 new ones. The cost to GLEB, if the money is not repaid, is equivalent to £10,000 per job. This is still small compared to the 8,065 jobs cre-ated in the central government's enterprise zones which cost between £35,000 and £60,000 each.
The GLC, with three exceptions, favours supporting medium-to larger-sized companies, from 40 workers upwards. It says that the argument in favour of small firms has many misconceptions: job creation capabilities are often exa-gerated and frequently achieved by paying low wages and undercutting unionised labour. Overall, small firms were responsible for only 8% of new jobs in London between 1973 to 1981. Meanwhile, 75 companies account for a third of all London's manufacturing jobs, and public enterprises and services employ one third of all London's workers. Small firms' growth tends to be concentrated in specific sectors and the GLC is arguing for a sectoral strategy to develop those areas rather than general measures to en-courage small businesses.
It also points to the more than 80 enterprise agencies which, added to the numerous support agencies for small firms run by both local authorities and independent bodies and the numerous financial incentives available, means that the small firms' sector is more than well taken care of, it argues. The GLC, however, has three exceptions to this bias towards the bigger firms. These are: helping the growth of the cooperative sector in London - this sector is obviously made up of small firms but the GLC sees it as part of its
says it would not support small firms, even in the form of cooperatives, that have the opposite effect; aiding ethnic minority enterprises because of the discrimination faced by these communities in the labour market but not "encouraging black capitalism"; helping sectors in which small firms play a major part such as the clothing and software sectors - m e a s u r e s will be aimed at strengthening these sectors through, for example, joint marketing and technological support and help to expand productivity.
Greater London Enterprise Board - GLEB
GLEB was set up as an independent company to carry out the GLC's employment policy. With some 80 employees it is divided into seven departments, each with a particular function.
1. The finance and administration division.
2. The information division which deals with inquiries and publicity.
3. The investment division which deals mainly with businesses employing more than 30 people that are in d i f f i -culty or need to expand in an industrial sector that the GLC wants to strengthen. An exception to this over 30 em-ployees rule are ethnic minority businesses that can ask for financial aid even if they employ less than 30 people.
coopera-tives. For e x a m p l e , w o r k e r s ' cooperatives would be suppor-ted only if they are paying trade union r a t e s , although support can be given to those cooperatives which use wa-ges to subsidize the business during the start-up period if they can prove that within a year or two they will be up to trade union rates.
5. The area and property division is responsible for
schemes such as factory conversions into industrial u n i t s . Usually a local trust involving the local community will be set up to look after the units.
6. The technology division has been setting up technology networks throughout London involving alliances between "employing" groups, universities and polytechnics and pro-duct banks (which research new propro-ducts) to examine and develop new products to be used both by companies funded
by GLEB and other g r o u p s , especially cooperatives and new firms.
7. The sector strategy division examines industries in London and sees which ones the GLC can possibly "influ-ence" and strengthen.
All firms receiving aid from GLEB have to draw up an en-terprise plan in cooperation with the w o r k f o r c e which sets out the firm's objectives and means of achieving them. The plan would cover product and market strategy, future investment and technological c h a n g e , location and pricing policy, employment levels and c o n d i t i o n s , skill mix and training p o l i c i e s , and equal opportunities poli-cies.
More specifically for cooperatives, GLEB used £1 million to set up the London Cooperative Enterprise Board (LCEB) to act as a first point of financing (loans of up to £25,000) for cooperatives - this work is being done pre-sently by the cooperative unit. The LCEB will be controlled and owned by the cooperative movement. Repre-sented on it will be five c o o p e r a t i v e s , three C D A s , two trade union members and representatives (one each) from the Industrial Common Ownership Finance ( I C O F ) , the Coo-perative Retail Society and the Industrial Common Owner-ship Movement ( I C O M ) .
The LCEB revolving fund would make loans under GLC cri-teria - £6,000 maximum per job for the first two years of trading; possibility for 100% financing; no guarantee or securities needed; first year repayment free, then paid back with interest equivalent to the rate of infla-tion.
GLEB believes that the existence of the LCEB wi 11 both streng-then the cooperative movement and allow the cooperative unit to concentrate on developing cooperative s e c t o r s , tackling the problems of the more established cooperatives and seeing how newer ones can be helped to expand. The unit also wants to give more attention to companies which might be interested in converting into c o o p e r a t i v e s .
One of the workers at the unit explained that they were not just interested in more rescue operations but would examine the whole restructuring package of a company and help both labour and management adapt to this new way of
running their business.
bigger cooperatives to improve their marketing, financial controls and even decision making. Help is also going to companies which intend becoming cooperatives.
GLEB is also trying to strengthen the sectors where coo-peratives are strong, that is, printing, building and wholefood. In the printing sector, cooperatives "have cornered the left political market. But it is now sewn up, so if we help one cooperative we will be literally helping it to take business away from the others. So we must encourage growth in the sector as a w h o l e , ensuring that they are looking at other m a r k e t s . " The 27 building cooperatives are another area where GLEB is looking at ways of helping them to pool their resources so as to bid for much bigger c o n t r a c t s , "they could have joint survey-ors," for example, she said.
The cooperative unit is also looking at new ways of boost-ing the growth of cooperatives in London but as the unit worker explained, "it is virgin ground as nobody had the money before to explore new w a y s . " What is certain is
that the infrastructure has to be developed and the unit is examining, with the GLC and other local authorities, possibilities of giving preferential contracts. Another idea is to create a cooperative zone in London which would become a focus for cooperatives.
What has caused some controversy is GLEB's demand that the CDAs keep an eye on cooperatives that have received funding and help them draw up their monthly reports. But the workers of the unit consider this demand as "perfectly reasonable". "GLEB has given loans to some 25 cooperatives and has a staff of 2 1/2 people in its cooperative unit, while there are some 40 CDA workers in London, a large number of them funded by the GLC."
She pointed out that the problem seems to have arisen more with the newly formed CDAs than the established ones which have seen some of their cooperatives fail. "Once you have been through that a few times it makes you look more cri-tically at the people walking in the door. Instead of en-couraging everyone willy nilly you actually make judgements about who you support and encourage and who you turn away." The newer CDAs are more inclined to support everyone, leav-ing the decision of sayleav-ing no to the fundleav-ing authorities. "We are cast in the nasty no person role." CDAs are being asked to perform to an extent "a policing role" but it is actually "better to stop a cooperative half way along ra-ther than at the end. "
The CDAs are also in a better position than GLEB to see if a cooperative is in real trouble. However, the unit worker admitted that the CDAs have until now had a free hand and GLEB looks as if it might be trying to exert an influence on what they are doing. She added, however, that GLEB
would not foreclose a cooperative in trouble at a moment's notice. "If they have lost financial control or need mar-keting help we can provide a grant to bring someone in." But it becomes obvious sometimes even from the first three months, if a cooperative is in trouble. "Sales figures are
often a good enough guide, and obviously profitability."
with the smaller applications. "It is a political formula to get the cooperative movement involved and force them to confront the issue of return of capital."
However, CDA development workers "have a difficult job." There is little formal training to give them the necessary skills and they are often under constant pressure from the agency's funding authority which "has big expecta-tions to help lots of people start up without realising what's involved. There is a lot of pressure to create num-bers and many of the workers do not have the experience to withstand it." The CDA workers are employed by people "who don't know what they are looking for to achieve ob-jectives that are unrealistic." None can fit the job de-scription 100% and this is why special training is needed · "on the job training is not enough."
Cooperative advice services
In addition to the GLC and local authority support, two cooperatives have been set up in London offering accoun-tancy services and marketing advice to cooperative enter-prises.
The Community Accountancy Service (CAS) offers professio-nal accountancy and auditing and helps with bookkeeping. It was set up in early 1982. There are four qualified accountants in the partnership and another four giving advice. The service is oversubscribed.
In the summer of 1983, the Cooperative Advice Group (CAG) was formed. It gives practical business help and marketing
CAG has a contract with the GLC (about one third of its i n c o m e ) , which enables groups in London that cannot
afford its services to have free advice - prices normally vary from between £85 to £100 a day. A group can have a maximum 15 days free help a y e a r , although prior GLC approval is required.
Paul Chaplin, one of the founders of the three-man group, says that CAG is there to offer fast business advice. On average each project takes anything up to 20 days. CAG has recently helped one cooperative that failed to achieve its financial targets to go through its accounts and do a staff review. Another recent example was gi vi ng 'techni-cal input on devising products."
He is convinced that the two main problems faced by coo-peratives are marketing and finance. "Coocoo-peratives have
very little acquaintance with anything other than the very basic financial control systems." He added that CAG always aims to work "with rather than simply for our cus-tomers so that they develop their own skills as much as possi bl e."
However, cooperatives often think that their marketing problem is simply that sales are not high enough but "in effect it goes a lot farther back than that, perhaps they are making the wrong thing." CAG analyses with cooperative members what should or should not be done.
CAG feels that its main difference is that all three mem-bers come from economics and business backgrounds "not important in themselves but give confidence to go in there and give it a try," and collectively have been working with cooperatives and small firms for some 20 y e a r s .
A trading cooperative is five times more likely to be re-ferred for outside help by the CDA than a start-up group, commented Chaplin. There is also a strong correlation be-tween older CDAs and the small number of cooperatives helped. Longer-established C D A s , with about four w o r k e r s , would be helping some 12 cooperatives at any one time.
"They weed out the no-hopers very quickly." This pattern
is very strong among the older C D A s , said Chaplin, as is
the equally strong pattern for younger CDAs to have up to 50 cooperatives on their books at any one time although most only expect a small proportion to start trading. "In
the end the number of cooperatives expected to trade is about the same but the longest running CDAs are much more open about focusing their e f f o r t s , the new ones don't have this confidence."
Most people think that it is the failure of a business that is the exception but in fact the opposite is true both for cooperatives and small firms. Chaplin gave fi-gures for the success rate of the Industrial Commercial
Finance Corporation ( I C F C ) . Funded by the high street banks, this investment company supports small firms "hand picked" on straight commercial investment criteria. Yet "only one in 10 are unqualified successes, three out of 10 complete failures and the rest are don't knows."
place, or. it did not realise it needed more capital, or had not controlled working capital growth. The real pro-blem "is that people do not have a clear perspective of what running a business involves. You have to keep your eye on so many different things. Any one can go out of equilibrium but you might not be getting the message." The main skill "is knowing what is important at a parti-cular time and having confidence and determination."
Industrial Common Ownership Movement - ICOM
ICOM is the best established organisation for workers' cooperatives. It is also the biggest. Most of the new co-operatives that have registered, including those in London, use the ICOM model rules. These specify that only workers can be full members of the cooperative, each paying a no-minal £1. Each member is then limited to this one share. The assets are collectively owned and on dissolution cannot be distributed to members but passed on to other common ownership enterprises, a central fund or a charity.
ICOM was the force behind the Industrial Common Ownership Act of 1976, sponsored by all three main British parties, which set out the first legal definition of common ownership,
The act also provided for a fund of £250,000 in loan capi-tal for cooperatives which was administered by the Indus-trial Common Ownership Finance (ICOF), set up in 1973 as ICOM's revolving loan fund.
financed through its membership fees. London ICOM is con-trolled by cooperatives which sit on its board. One of the CDA workers interviewed described the relationship between London ICOM and the CDAs as "one of partnership. We do most of the ground work."
As for the future, "the CDAs will continue doing the lo-cal work and ICOM the more politilo-cal and regional work more like a professional body bringing groups together
rather than initiating."
The C D A s , along with ICOM have attempted through a series of networks and regular m e e t i n g s , to inform each other of a c t i v i t i e s , campaign together for changes and decide on new policies. Through these networks the CDAs with ICOM have arranged some across-borough training programmes.
Together they have also helped set up the national Large Cooperatives Network, comprising cooperative enterprises employing more than 20 w o r k e r s . This was felt necessary as such cooperatives need a different kind of support to help them deal with particular problems such as coping with democratic participation in decision making, finance and expansion. Larger cooperatives have felt that CDAs and local authorities were more geared to the needs of smaller cooperative e n t e r p r i s e s . The first meeting of this network was in October, 1983 and it is still too early to make any conclusions.
The National Cooperative Development Agency
because its members are appointed by the government and it is not controlled by cooperatives. The National CDA has tended to take a more conservative approach to deve-lopment work. It is an advisory, promotional and research body to encourage cooperative enterprises. It has no right to make loans or grants. It has also produced alternative model rules to those of ICOM allowing outside shareholders
unlike the ICOM rules it is then up to the members to de-cide what happens to the assets if the business is dis-solved. The National CDA has also helped the creation of neighbourhood cooperatives involving the whole community and offering services needed such as child care.
A different initiative from local authorities - Camden Counc il
Despite the upsurge of local CDAs in London, some local authorities, while favourable to cooperative enterprises, have chosen a different path. Camden is one such example where the local authority preferred to mix cooperative de-velopment with the dede-velopment of small firms. Camden gave two reasons for this decision. "There was no push to set up a CDA from the Camden local c o o p e r a t i v e s , so if one had been set up it could have ended up being run by politi-cians, councillors and do-gooders rather than local coo-peratives," said an official of the council's economic development unit.
provide secondments for the small firm advisory service and the council would provide secondments for cooperative development work.
T h i s , however, has not been altogether s u c c e s s f u l , "Camden had never gone out of its way to get a terribly good re-lationship with the business world," but it did manage to get three secondments - the manager, one typist and a chief clerk. The council has seconded two cooperative de-velopment w o r k e r s .
The idea to set up the Enterprise Agency came from the council's economic development unit, which had been engaged in development work especially with ethnic m i n o r i -ties. Although it does not give grants, the unit was able to help cooperatives through advice, small loans and by giving a guarantee to banks which would not have other-wise agreed to make loans. Some 18 cooperatives were help-ed by the unit in 1983. However, the Town Hall "is very off-putting to a lot of groups and it was thought better to set up a separate business advice centre,"
From the experience of the economic development unit, it was felt that a mixed agency should be formed which would investigate whether people really wanted a collective structure or a more traditional small business and help both types of groups.
it was both the developer of the project and the funding group. By setting up the Enterprise Agency,development workers will have distanced themselves from the funding body. They will now report to the economic development unit and it will be up to them and the Council to decide. Camden sometimes gives grants to cooperatives but only when there is a very big commercial risk and the council feels that the project should go ahead.
One of the workers feared that the agency might reproduce the hierarchy existing in the council and private industry. Even so, the cooperative workers at the agency will have a relatively free hand and working methods will remain close to those of local CDAs. The economic development unit will now devote most of its activities to looking at measures to stimulate the local economy and examining job possibilities for the borough. One of the latest ini-tiatives, undertaken in conjunction with the council's women's unit, is examining how women in Camden can be encouraged and helped to set up their own businesses. A number of measures are being looked at - seedbed units, setting up a support network of women advisors, especially women who are already running their own businesses,
train-ing programmes, information campaigns, etc.
Small firms' advisory service
Many local boroughs have small firms' advisory services, but, as is clearly shown in the case studies, few coopera-tives have used these services.
The counselling service is staffed by people seconded from private industry, mainly retired businessmen and execu-tives. However, only the first consultation is free and then up to Î0 consultations of any length can be requested at the subsidised charge of £20 plus VAT per day.
The small firms' service offers a lot of technical advice but does little development work. Most people thinking of starting up an enterprise use this service once, rarely paying a second visit.
It is rare, for example, that somebody will be helped to do complicated cash flow forecasts; the employees of the service generally give a few examples and leave it up to the individual to go ahead. Market research is explained during the first visit and the small firms' service usu-ally has a list of companies that can undertake studies. But the cost is often prohibitive for most individuals coming in for first advice.
One employee at the Islington small firms' advice bureau said that their role is more "pointing the direction that people ought to go." He felt that this service should re-main separate from the cooperative development agencies and added that they often refer people to each other.
Support from private industry
Local enterprise agencies and trusts also exist in London with one or two staff concentrating on providing advice,
The London Enterprise Agency (Lenta) offers its advice service for small firms on a free or subsidised basis. Backed by 11 major British companies, Lenta also offers direct services such as mounting exhibitions and organis-ing seminars where small firms can meet key buyers from bigger companies, the so-called marriage bureau. Training courses are also available on a fee-paying basis and small firms can apply to rent one of Lenta's small units in In-ner London.
In addition to a number of other private initiatives in London, there are also the Chamber of Commerce which pro-vides support, contacts and information on exports. In-formation is also given on trade associations and indus-try research bodies and the chamber provides advice and technical back-up to small businesses. Again, this ser-vice, earmarked for small firms, is little used by coope-ratives. Reasons vary from not knowing about them, mis-trust, fear of high costs involved and doubts about their general usefulness for cooperatives and community busi-nesses .
An interesting scheme is the Manpower Services Commission enterprise allowance scheme recently started for both co-operatives and small firms. This provides £40 a week to-wards wages for the first year of a new business. However, grants are limited and to qualify, each person has to show a £1,000 investment in the business and must have been un-employed and in receipt of benefits for at least 13 weeks.
Additional stringent rules further restrict access to this grant and some of the cooperatives interviewed in the case studies said that they had found it almost impossible to get their applications approved.
Although London has a good network of advice services these are mainly aimed at traditional small firms. It was only in the last decade, with the disappearance of many jobs, that there has been an upsurge of local employment initia-tives with emphasis on encouraging collective ownership enterprises and attempting to involve some of the city's most disadvantaged groups.
The role played by the GLC and some of the London boroughs in supporting local job creation has been crucial. The GLC has used its large resources to provide finance and help set up support structures, especially in boroughs where the local councils had little interest in such initiatives. One of the most important aspects of the GLC's work has been its industrial strategy, which has given a general economic framework to local job creation.
po-liticai authority in London, as members of each quango will be appointed and responsible to the central govern ment.
Islington Cooperative Development Agency
Islington CDA, one of the longest standing advice cen-tres in London, was set up in early 1981 following a
campaign by the 14 established cooperatives in the area. The cooperatives had formed themselves into the local cooperative development group, and with various "other worthy people" as well as the London Cooperative S o c i e -ty, Cooperative Party and the Islington Voluntary Action Group, managed to get support from the London Borough of Islington for the agency. In a d d i t i o n , funding, for a five year period, was given by the Community Projects Foundation charity. The agency now has four workers and after two and a half years, of operation has helped to set up 20 new c o o p e r a t i v e s .
The activities of the original 14 cooperatives covered mainly printing, publishing, w h o l e f o o d s , bookselling and d i s t r i b u t i o n . The new c o o p e r a t i v e s ' activities now include a driving s c h o o l , building, painting and decor-ating, office cleaning, catering, motor m e c h a n i c s , lighting design and musical instrument repairs.
the economy. With the borough council and the coopera-tive development group, the foundation started to plan the future CDA as its first project to help employment.
Funding for the CDA was agreed for a five-year period on the understanding that the development group would then take over. However, as one of the present workers pointed out, "whoever had that idea did not know the economics of it." The cooperatives would find it even hard to fund one worker let alone the whole agency. About one third of the funding now comes from the found-ation and the rest from the council - it funded the fourth worker last year.
The CDA offices are near the borough's high street in a building rented by the foundation from British Rail. Most of the building is sublet to the Citizen's advice bureau and the offices of the CDA are quite cramped.
The CDA workers, however, are fairly optimistic that new funds will be found for the agency once the five years are up. Some hoped that the local authority would
take over the total financing. As one of them said "we are better off than most CDAs as we still have two more years of definite funding."
The area of Islington
to survive the recession. It was also faced with a num-ber of inner city problems - loss in services, increas-ing overheads, prohibitive rents, and deterioratincreas-ing or inappropriate commercial property for new industries.
Internal structure and working of the CDA
The CDA now has four workers. None had formal training in business management. One of the workers, the team leader, has been working in CDAs for four years. "I learned a lot on the job." She studied economics, "not relevant at all," and had a basic knowledge of accounts, "they should teach that at school." Two of the other workers had already worked in cooperatives, one mainly on the sales side, customer liaison and marketing. CDA workers take turns to follow courses.
Although nobody really specialises at the CDA, the work is slightly "structured". The "team leader" and two of the other workers are responsible for development work, and the fourth person, the "centre organiser", deals mainly with administration. She does, however, also deal with initial inquiries. The structure of the work was set out clearly when the CDA was set up.
The team leader is responsible for general coordination and undertakes most of the CDA's public functions, ie, represents the agency at council meetings. Each develop-ment worker has a list of cases which they have to
The lack of "specialising" by the workers means that for more difficult problems "we have to call in out-si d e h e 1 ρ. "
To oversee the funding and staff and decide the long-term policy of the CDA a management committee was set up. The workers report monthly to the committee and discuss future plans of action. When setting up the CDA,the funding bodies also decided on the composition of the members of the committee: two representatives from the London Borough of Islington; two from the Community Projects Foundation; four from the coopera tive development group, as well as one co-opted soli citor. The chair rotates every two years.
Relations between the management committee and the CDA are very good. "We always worked well with our manage ment committee. It is supportive and not involved in
the day-to-day running. The committee tends to accept our recommendations, although we don't always get what we want."
Problems between CDAs and management committees do ex ist but a lot depends on how they are set up. "There is a problem if it is made up of people who are not comm itted per se to cooperatives but feel that they should be involved." Some management committees have trade
Promotion and counselling work
During its first year of operation it was decided that the CDA should keep a low profile, rather than launch a big publicity campaign. The existing cooperatives in the area and the numerous community groups were to be their base and by lying low it was hoped that the agency would not be too overwhelmed by the demand.
But even within its first year the agency had on average four new inquiries a w e e k , as well as development work with a number of groups. The development work ranges from advice on legal constitutions and registration to support with market research, budgeting and cash flow forecasting,
The CDA members insist that their main concern is to help establish viable cooperatives that can guarantee their members secure jobs with living w a g e s .
There is a good infrastructure in Islington with many advice centres and active organisations. Although the agency has done a lot of publicity, many people are re-ferred to it by the town hall and other services in the borough such as immigrant welfare groups and citizens advice bureaux.
When a group first asks for advice there is a general discussion with one of the workers on what they want to do. But "the level of advice given 'depends on how far they have worked out their ideas. They might have de-cided what they want to sell and where, and so they need help with the market research." Other groups are less clear about what they want to do so the worker will raise with t h e m a whole range of questions that need tackling before the cooperative can begin trading. "Is there a market for their product or service; at what particular sector of the market will they aim; who are their competitors; how will they price their product or service; how much capital will they need; what sort of premises do they require and so on?"
During the first visit, the worker would explain the implication of being a cooperative. "A lot of people get worried about setting up a common ownership enter-prise. Can they sack someone, for example, they ask."
business ideas, with little concept of the work necess-ary to get the business off the ground." During the group's first visit the worker has to "get rid of the illusions without discouraging them from going ahead."
Sometimes there is "no point in going ahead." The wor-kers at Islington do not hesitate to tell the groups if it is clear that "their idea would not work or co-operatives are not the correct structure for them to use." Community-type centres, for example, will always need subsidies, "it is easier to get such funding if you are a charity." In other cases, people want to set up their own firm and be self-employed; the worker would then give advice on forming a limited company or partnership. The agency workers cannot spend a long time with people wanting to set up on their own. "We send away a number of people but it is difficult be-cause they cannot always get advice elsewhere."
It is up to the group to return for their second visit. "After the initial inquiry, some people come back, hope-fully having worked out something on the basis of our previous talks; some don't come back and others don't come back for a very long time." But nearly all the groups that return have completed the first stage of their work - the so-called feasibility study, although at the agency they prefer to call it a plan of action, "a feasibility study can cover a multitude of sins."
need to be made. "We don't expect them to come back with whizz-kid plans but we try to force them to think
about it a little." They certainly "don't come back with a plan any bank manager would be happy to look at;
it is our job to get it at that stage." Many of the groups have come up with novel ideas of doing their market research. "We just help by posing the questions that need to be answered, where are you going to sell it, what particular group, if women, young women, women in Islington?" Once they have gone through all those questions it becomes evident that "marketing is common sense dressed up in very fancy language."
A potential wholefood vegetarian restaurant did a blan-ket street survey in a part of Islington and got a good response. Another group wanted to set up a telephone/ delivery food take-away. They did a door-to-door survey on an estate, worked out where other take-aways in the area were operating, the price range people were pre-pared to pay, the distance they had to travel to get to their nearest take-away, the age group and travel faci-lities.
It is at this point, when the survey is finalised, that the group will reappraise its ideas and modify them if necessary. One group wanted to produce high fashion
clothes. When they did their costing they realised there was no market so they changed to manufacturing clothes for young people. Only a few groups refuse to change thei r pi ans .
or an application for a setting-up grant. They might also be looking for premises." Above all,"we wouldn't say to a group, go away, do market research and prove to us you have a market before we help you any further."
A common problem is the tendency to underprice or over-price a product or service, either through inexperience or failing to make allowances for overheads or cash flow problems. Many cooperatives are also intimidated by concepts such as financial planning, use of targets, cash flow and budgeting. The agency tries to familiar-ise them with these concepts and shows their importance in the daily running of a business.
Once this stage is over both the agency and the cooper-ative are aware of the likelihood of success and poten-tial pitfalls. The feasibility study also serves to sell the business plan to financial bodies. If all the signs are good the next step would be help with regis-tration and the start of trading. Nearly all the operatives use the ICOM model rules. However, the co-operatives are told of other options they could use. Advice and help is given with tax, insurance, VAT and employment.
The CDA says a big part of its development work is to encourage people. "Even if the cooperative is not successful, the people who have gone through the expe-rience are always likely to do something else." The agency differs from a traditional advice or enterprise agency because "we just don't look for the commercially viable idea and if that's not obviously there, abandon it." This is the approach of most CDAs, they say. "If we weren't prepared to work on a really basic level then there would not be many cooperatives."
One of the problems that the CDA has not yet resolved is whether the agency should take on new work indefini-tely "and not turn anyone away," or if they should limit themselves to a few cases. Also how much importance to give to education and promotion of the agency.
Although the agency tries to involve ethnic minorities in its work, it does not believe that special methods of work should be adopted. The same goes for women. All workers are expected to take the time according to the needs of any one group. Language problems, however, re-main a barrier and have limited the agency's contacts with the Greek Cypriot community, for example.
Helping cooperatives to register and start trading is not the end of the agency's work. For at least one more year, the cooperative will keep in close touch with the agency.
arms up in horror if they are doing half the jobs for cash and are not registered with the VAT." Although the workers explained that they would never recommend that cooperatives follow this path, they feel it is important for the cooperative to have trust and confide in them; that way the agency can properly assess how the work is progressing without endangering the legal standing of the cooperative. "Many dp work· in the black economy to an extent and that's where a lot of their problems come from. One thing we can do is to help them legitimise their activities and unless they can talk about it they never will."
This relationship of trust is essential if cooperatives are to become legitimate businesses.
How far CDAs should monitor cooperatives especially on behalf of funding authorities is a moot point. Diffi-culties have arisen following the demand by GLEB that CDAs should closely monitor cooperatives that have re-ceived loans from them. The workers of the CDA feel that this is far from a resolved issue, as they are put in a position of conflicting interests. If something happens that they are not happy with, are they obliged to report it to the funding authority first or to try and resolve the problem with the cooperatives? As one of the workers said, "I feel at all times we are re-sponsible to the cooperatives." They feel that the agency's role is to help the cooperatives prepare regu-lar financial reports and be there to discuss problems.
is no point in increasing it through asking for constant information on progress.
The same goes for defining what a model cooperative is. Although definition should be made clearer this should come from the cooperative movement and not from a finan-cing body, one of the workers said. The CDAs should be meeting the needs of cooperatives as they express them rather than imposing rules and regulations, the workers added.
The type of premises required tend to be small and me-dium-sized retail and restaurant property, light indus-trial workshops and office space. To secure their pre-mises most of the cooperatives need financial support from the local borough. However, delays in payments of these grants (even when the premises are counci1-owned, delays can be long), have meant that many cooperatives have lost their premises, been forced to abandon them or move out of the borough. "It is a very frustrating period, they have waited for months, they have a clear business plan and yet can't get started." However, some cooperatives do their first trading from their homes and others use the agency as an address.
The only solution that the CDA sees is to set up small workshop space to provide start-up premises for cooper-atives and other employment initicooper-atives - once estab-lished they would then move out. But this has not proved easy. Since 1981 the CDA, along with the Islington
funds and premises for such a workshop. "Large sums of money are involved and enormous bureaucratic problems."
The council still seems unconvinced of the need, despite the fact that many cooperatives have to move out of the borough and the evidence that commercially run workshop schemes are oversubscribed.
The general idea is that the borough gets the premises and leases it to the workshop body, which would run it for cooperatives and nursery cooperatives. "A lot of problems remain, how you determine a commercial rent, what you charge."
Bookkeeping and wages
Islington CDA feels that a lot more could be done to get everyone in the cooperatives to understand what the fi-gures mean, "administration is about control." The same goes for cash flow forecasts: "you can't do it for them, but wi th them."
But often people do not understand the importance of keeping good books, "most people don't like figures and are happy to let someone else do them, without realising the implications." It is a "worrying sign," comments one of the workers. If a cooperative cannot do its own books, it suggests they are not "financially responsible."
work with one or two of the cooperative members while trying to get other members "to try and understand the figures." Thay also help by showing the person doing the accounts how to make regular reports to the whole group.
Many cooperatives' bookkeeping systems remain "a mess," especially at the beginning. The CDA workers often had to put accounts together from a pile of receipts and in-voices before handing them over to an accountant for the final audit. In a way the chaos helps cooperatives to understand the importance of their books; when they see the mess they "realise there is a need for careful book-keepi ng. "
Accounts and general financial planning seem to be the two areas where groups most rely on the CDA services, especially during the first two years.
Marketing problems usually come up after a group has started trading, but as one CDA worker said, "you never
look for marketing advice unless you have a financial problem." The agency steps in to help, although it can turn out that the marketing of a product may not be the root of the problem - "it may be costing, not charging enough or other factors."
some complaints as some groups feel that the CDA is not as "professional" as they would like.
Raising finance is an overwhelming problem. Cooperatives getting local authority grants have higher chances of success in convincing their local banks to make loans. The CDA is familiar with the requirements of bank m a n a -gers and helps cooperatives with their proposals and presentations for loan or overdraft f a c i l i t i e s , and attends bank interviews if requested.
Although the CDA has successfully helped several cooper-atives to secure bank loans or o v e r d r a f t s , the main
source of financial backing is still the local authority or the GLC or GLEB.
The GLC has given ICDA £22,000 for cooperatives in the area. Some £ 1 5 , 0 0 0 of this grant was for ethnic minority e n t e r p r i s e s , £ 4 , 0 0 0 for feasibility studies and £3,000 to purchase office equipment for leasing to cooperatives - many cooperatives have used this service.
Wider development work
Islington CDA is involved in employment based campaigns in the borough. They are members of the London and
national CDAs network. As part of the promotional and educational role,the CDA has been organising evening classes on workers cooperatives in adult education in-stitutes in the borough. It has run two 12-week evening classes on cooperatives for members of new or proposed cooperatives and interested individuals. The courses are divided into the theory and practice of setting up cooperati ves.
The CDA workers have been involved in the Cooperative Enterprise Programme, funded by the Manpower Services Commission (MSC) and the GLC. It is designed to provide a four-month training course for people setting up operatives and involves a placement in established co-operati ves.
Islington is also one of the six boroughs in London in-volved in the Women's Link Up which offers women who lack other employment opportunities courses on how to start up cooperatives.
The CDA is also involved in the technology networks set up in London and funded by GLEB to stimulate the local economy through the use of workshops where people can develop prototypes or goods to manufacture.
cooper-atives are encouraged to join their trade union. However, not all the cooperatives see the point of joining a union, often being aware of "the hostility that exists."
A breakthrough could be the decision of the Transport and General Workers Union, T&GWU, to open a cooperative branch for members who do not have a craft union to join. However, the CDA workers say that whenever unions have been contacted about a specific cooperative, their responses have been "quite positive."
The CDA is convinced that its first year's low profile allowed it a breathing space to establish a secure base in the borough.
One or two agencies in ether London boroughs tend to apply a "top down strategy" where the availability of support and assistance depends on close monitoring and control of the cooperative. Islington CDA disagrees with this approach as it does not comply with either the concept of cooperation or self-sufficiency. "The probability of success will be greater if the cooper-ative is initiated by those people who will eventually work in the business. It is also important that the CDA's resources and expertise are transferred to the cooperative, and not retained within the agency, which tends to discourage independence." At the end of the day the cooperative must be confident that it has ulti-mate control and responsibility for its business; this, however, does not preclude seeking advice from the
At present workers' cooperatives in Islington are a tiny percentage of local economic activity even in the small firm sector. However, the agency feels that the way forward is not just helping new start-ups. What is also important is consolidating the existing coopera-tives .
"Securing finance will continue to be an issue for co-operatives, but financial backing alone will not be enough to ensure the stability of the smaller coopera-tives or to enable them to expand." A lot more resources are needed to enable cooperators to acquire further
skills and expertise to facilitate them in the develop-ment of their enterprise.
The CDA welcomes the establishment of the London Cooper-ative Enterprise Board, set up by GLEB to give financial backing to cooperatives and to a large extent to be ma-naged by the cooperative movement.
Some facts and figures
In 1981, the first year of operation, the agency recei-ved 70 inquiries, the majority coming via the network of cooperatives and community organisations in the bo-rough. Some were referrals from the borough and the small business counselling service with a few coming from job centres and from the limited publicity and con ferences attended.
coopera-tives, eight ideas were unfeasible as cooperacoopera-tives, 12 inquiries came from outside the borough, 15 were from established cooperatives and 19 resulted in no further contact.
A breakdown of the inquiries shows that 36% were for specific information and 64% were cooperative inquiries of which 25% were from people wanting to set up cooper-atives in printing and publishing; 22% in professional and other services; 16% in building, painting and deco-rating; 13% in arts and the media; 8% in catering and entertainment; 6% in textiles; 5% in transport; 2% in manufacturing; 2% in consumer and 1% in retail.
It takes about 12 months for a cooperative to be set up, and the next 12 months are still considered as a forma-tive stage. At the beginning, the agency would see a new cooperative every two or three weeks, then three or four times a year.